CDCs have limits for interest rates, terms and fees that are set by the SBA. The loan must have a term of either 10 or 20 years with a fixed interest rate which is set by the US Treasury 5 and 10 year rates. In the case of a 10 year loan set by the 5 year rate, .38% will be added to the interest rate. In the case of a 20 year loan with a 10 year rate, .48% will be added. There are also other additional fees.
Traditional lenders such as banks, who will cover up to 50% of the loan, are not under the jurisdiction of the SBA, so their rates are not subject to SBA regulation. Rates and terms are negotiable but in general you can expect an interest rate on this portion of the loan between 4 and 8% and a term from 5 – 10 years with an amortization up to 25 years. Note that longer amortization schedules will result in lower monthly payments but a higher balloon payment at the end of the term.
Because the purpose of the SBA Loan Program is to stimulate the economy, partially by creating or securing jobs, your CDC/504 Loan must create or retain one job for every $65,000 borrowed, except for small manufacturers where the ratio is one job for every $100,000.
